Tuesday, November 23, 2010

.GOV Soaking Up Hybrid Capacity

According to Bloomberg, Obama's administration has purchased 25% of domestic hybrid production. In fact, it appears that Obama was the biggest customer for the Malibu mild hybrid, which was a market flop.

The government purchased about 64 percent of GM's Chevy Malibu hybrid models and 29 percent of all Ford Fusion hybrids manufactured since Obama took office in 2009, the data show. GM stopped making the Malibu hybrid in 2009 after lack of consumer demand.

Hybrid demand is weak because of relatively reasonable gas prices, so the U.S. government is helping to keep hybrid capacity utilized by buying for the federal fleet. This will help the taxpayer in the long run, by using less fuel, but the cost up front is significant.

Interestingly, Bloomberg reports that the average purchase price was about $5,300 under MSRP. GIven that hybrids tend to be a loss leader or break-even product to begin with, this program probably didn't help Ford and GM make much money.

For the hybrid business to prosper and evolve, two things need to happen, and soon: batteries need to be cheaper, and gas prices need to be higher. The consumer has proven that he is primarily cost driven.

2 comments:

Absolutely right on the price of gas and "the demand thing" for these vehicles. Auto companies may end up learning that "even if we build them, they won't come" and buy them. Uncle Sam's out-of-touch, me thinks...